Public Bill Committee

[Derek Twigg in the Chair]

Derek Twigg: Before we begin, I remind the Committee to observe social distancing and to switch electronic devices to silent. The Hansard reporters would be grateful if hon. Members could email electronic copies of their notes to hansardnotes@parliament.uk.

Clause 53 - Procedure for service, etc

Alan Whitehead: I beg to move amendment 29, in clause53,page32,line30,leave out “may” and insert “shall”.
This amendment would require the Secretary of State to set out the process to be followed.

Derek Twigg: With this it will be convenient to discuss clause stand part.

Alan Whitehead: We start today’s proceedings with the most innocuous amendment imaginable—it is so innocuous that it is in the realms of “barely noticeable”. It is particularly innocuous in terms of the debates the Committee has already had on the use of the word “may” and the words “shall” or “must”. On this occasion, the amendment merely suggests that in subsection (1)—
“The Secretary of State may by regulations make provision for the procedure which must be followed in giving a notice or serving an order under this Act”—
“shall” should be substituted for “may”.
What is interesting about making provision for procedure that must be followed in giving a notice or serving an order is that the impact assessment assumes that that will be done and analyses how those notice-giving arrangements might work. The impact assessment assumes that the Secretary of State will do that, but the Bill does not state that the Secretary of State must do it.
I cannot think of any good reason why that change should not be made. I can see virtually no circumstances in which the current wording will do anything either way in relation to the issuing of the notices and what those notices might consist of. A requirement that the Secretary of State “shall” do those things would be an unalloyed advance in assuring that they happened. It would not have any consequences for national security or for company considerations, other than that companies might consider it rather more comforting that the Bill requires those details, which are important to them, to actually be produced.
The Minister can perhaps enlighten us on the wider issue. I have been on the other side, constructing and putting a Bill together, years ago in my brief but glorious—or inglorious but brief—ministerial career.

Nadhim Zahawi: Glorious.

Alan Whitehead: I think we can agree that it was brief. Bills would come to Ministers, fresh from the wells of construction and the pushing of pens to get them into good shape. I wonder whether there is a style guide, deep in the bowels of a building somewhere in Whitehall, that says, “Whenever the Minister is supposed to do something, write ‘may’ in small print.” It is such a long-serving style guide that people have forgotten why the word was ever put in the Bill in the first place.
The Minister would do a great service to the writing of Bills if he were able to say, “I don’t want to go along with the style guide. If someone is supposed to do something, I want to have that written in the Bill.” I appreciate that if the Minister were to say that when sitting around with a number of people who had a freshly minted copy of the proto-Bill in front of them, there would be much stroking of chins and suggestions of, “That is a rather brave method of proceeding, Minister.” But the Minister has the opportunity today, entirely divorced from all those influences, simply to say, “Yes, we will accept this amendment as a stake in the ground for the uprating of the style guide, wherever it happens to be.” That would be a great service to the Committee and to the nation, by getting us into a position where Bills are written to mean what they say and say what they mean.

Chi Onwurah: I do not want to anticipate what the Minister will say, but he has said, with regards to similar amendments, that stating that the Secretary of State will do something does not mean that he definitely must do it. Does my hon. Friend agree that for the sake of clarity—for us in Parliament but also for businesses, particularly those affected by this—changing that one word would greatly improve the understanding of how the Bill will work?

Alan Whitehead: My hon. Friend is absolutely right. If I went to my bank manager, who had called me in about my overdraft, and I said, “I don’t need to say anything other than, ‘I may pay it back,’ but don’t worry, because I will pay it back,” my bank manager might be a little upset and might have something to say about it.
It is curious that we have locutions in the putting together of Bills that fly in the face of common-sense parlance. I agree with my hon. Friend that it really is no great defence to say, “Don’t worry. We don’t need to change this, because we are going to do it.” It would be far better all round if we were straightforward, accurate and clear and put this wording in the legislation, so that everybody knows what we are doing for the future. If, by so doing, the Minister can banish that style guide from the bowels of the building forever, that would be a great service.

Nadhim Zahawi: I beg you indulgence, Mr Twigg: I intend to speak first to clause stand part and then to amendment 29, which was tabled by the hon. Member for Southampton, Test. Clause 53 gives the Secretary of State the power to make regulations that set out the procedure that the Secretary of State must follow when giving a notice of, or serving, an order once the Bill becomes an Act. The level of detail that these provisions will involve is most appropriately dealt with in delegated  legislation.That will also allow the provisions to be modified more easily if changes are deemed appropriate—in the light of operational experience, for example. I know all colleagues will share with me the wish for the unit’s operations to be as efficient and as slick as we can make them.
Examples of notices and orders include information notices, attendance notices, interim orders, final orders or penalty notices issued by the Secretary of State for non-compliance. The clause sets out what may be included in the regulations. For example, they may include the manner in which a document must be given or served and whether it is allowed to be served electronically—for example, by email.
Amendment 29 would require the Secretary of State to make these regulations, which returns, if I may say so, to the recurring theme raised by the hon. Member for Southampton, Test, about the difference between “may” and “shall”. At the risk of becoming predictable, my thoughts here carry certain echoes of our previous discussions.
As hon. Members will know, clause 53 gives the Secretary of State the power to make regulations that will set out the procedure that must the Secretary of State must follow when giving a notice or serving an order once the Bill becomes an Act. It is an entirely laudable objective to ensure that the Secretary of State provides those affected by this regime with the right information on the operation of the regime, and it is one that I shall always support. In practice, though, the amendment is unnecessary.
Although the Secretary of State may make regulations to that effect, in practice, for the regime to function effectively, he must do so. I assure hon. Members that the Secretary of State certainly does not propose to commence the regime without first making these procedural regulations. I therefore assure the hon. Member that the amendment is not required, as he and the Government seem to be in hearty agreement on the importance of such regulation. I ask him to do the honourable thing and withdraw the amendment.

Chi Onwurah: It is an honour to serve under your chairship again, Mr Twigg. I detect a slight rise in temperature, at least on this side of the Committee Room. I do not know whether that is due to the heated exchanges over “may” and “should”—

Nadhim Zahawi: Passionate exchanges.

Chi Onwurah: Warm exchanges. It is certainly something to be welcomed.
I would like to say a few words to clause 53 stand part. As my hon. Friend the Member for Southampton, Test observed, this is another example of a “may” rather than a “will”. The clause exists purely to enable the Secretary of State to make regulations—that is its function—and yet it places no requirement on the Secretary of State to do so.
While the Minister gave a warm response, saying that he and my hon. Friend are on exactly the same page and so on in our desires, I remind him that the Bill is not about our desires; it is about a legislative framework that protects our national security and gives, as much as possible, clarity and certainty to those impacted by it. It  is because we recognise the importance of the clause that we wish it to have some effect in law, as opposed to being the gentle suggestion it seems to be at the moment.

Alan Whitehead: The Minister has used a bank manager defence. If my bank manager wrote to me to say, “You have an overdraft that you must pay,” and I wrote back and said, “Dear Bank Manager, I may repay my overdraft,” and then the bank manager called me in and said, “What is the meaning of this letter?” and I said, “Don’t worry, I will pay the overdraft soon. No problem. That letter stands,” that would be a problem for me, but apparently not as far as legislation is concerned. The Minister has effectively said, “Don’t worry. This is definitely going to happen. We are all agreed it will happen,” so why not write it in legislation?
I will not pursue this matter to a Division, because we have exhausted this mine in Committee. The Minister knows that this is not the first time I have raised this issue during the passage of Bills, and I will continue to do so because it is an important principle that legislation should say what it will actually do. Perhaps that is a bit basic, but that is what I think is important. I will indeed withdraw the amendment. I thank the Minister for his reply this morning, although it does not dent my crusading zeal for this particular change to be made in legislation generally. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 ordered to stand part of the Bill.

Clause 54 - Disclosure of informationClause 54

Chi Onwurah: I beg to move amendment 30, in clause54,page34,line9,leave out
“which appears to the Secretary of State”
and insert
“which, on a reasonable enquiry, appears to the Secretary of State”.
This amendment would require the Secretary of State to only share information, acquired in the course of national security reviews, if the Secretary of State has first undertaken reasonable enquiry.

Derek Twigg: With this it will be convenient to discuss the following:

Clause stand part.

Clause 55 stand part.

Chi Onwurah: In clauses 54 and 55, we consider the disclosure of information by the Secretary of State for Business, Energy and Industrial Strategy, and, in clause 55, information held by HMRC.
Clause 54 specifies the circumstances in which information may be disclosed. Subsection (1) provides an information gateway for public authorities to disclose information to the Secretary of State for the purpose of facilitating the exercise of his function under the Bill. Subsection (2) permits the Secretary of State to disclose information received under the Bill to any UK or overseas public authority for specified purposes. Subsection (9) states:
“‘overseas public authority’ means a person in any country or territory outside the United Kingdom which appears to the Secretary of State to exercise functions of a public nature”.
The amendment seeks to address the wide definition of the overseas public authorities to which the Secretary of State might disclose information.
The Minister has previously asserted that Labour Members are looking to give more and more powers to the Secretary of State, but here we wish to help the Secretary of State, which is the motive behind all our amendments. We wish to aid the Secretary of State by somewhat subscribing the persons or organisations with which he—in this case, at the moment, the relevant Minister is a “he”—is allowed to share information, by inserting in clause 54 the words
“which, on a reasonable enquiry, appears to the Secretary of State”.
Therefore, the amendment would not simply leave the process open, as it were, to appearances only, without any inquiry.
Again, the reason for tabling the amendment is—returning to a theme that Labour Members constantly refer to, which I fear the Minister still does not recognise or acknowledge—that this is a radical transformation of national security screening, in the case of mergers and acquisitions. As such, the Government must not only hold the confidence, but actually gain the confidence, of businesses and investors, because this is new. Businesses and investors do not have confidence in the Government’s ability to do this thing at the moment, because it is not something that the Government are doing at the moment. So, the Government need to gain that confidence, and sufficient confidence to ensure that those going through a security review feel confident about sharing information that is relevant to that review.
Again, I remind the Committee that it is necessary that the sanctions for providing misleading information, whether unintentionally or not, and those for not providing information, are significant, as we discussed in our previous sitting, on Tuesday. So, it is all the more important that those going through a security review feel confident about sharing information that may be extremely sensitive. In fact, can we agree that this information is likely to be confidential and sensitive, given that it might appertain to national security and also to the capabilities and intentions of the investors in the businesses under consideration?
So, to give confidence to those going through a security review, the Government must provide adequate mechanisms for data sharing, adequate investment security unit capacity for secure data handling, and adequate protections on subsequent data sharing. However, the Bill does not do those things.
Speaking also as shadow Minister with responsibility for digital, I am often at a loss to explain and justify, or even understand, the Government’s approach to data sharing and data protection. The Bill refers to setting up “information gateways”, which is a term that is used simply to say that the Government are allowed to share data. Is the Minister aware of how many of these “information gateways” exist in his Department and across Government? Given the number that existed in the Treasury three years ago—that was the last time I looked at this issue and I think there were about 500 then—I am concerned that the Government have lost track of the different ways in which they, and particularly in this case the Secretary of State for Business, Energy and Industrial Strategy, are allowed to share data.
I know that the consultation on the Government’s national data strategy closed just yesterday. The Government describe that strategy as being unashamedly “pro-growth”. They do not say that it is unashamedly pro-security; indeed, there are few references to national security in that national data strategy. Mission 5, championing the international flow of data, states:
“In our hyper-connected world, the ability to exchange data securely across borders is essential. Economically, it drives global business, supply chains, trade and development; it will also be critical in enabling the global recovery after coronavirus.”
That is very true. It continues:
“On a personal level, people rely on the flow of personal data… Finally, it has a huge impact on international cooperation between countries, including for law enforcement and national security, keeping the public safe.”
It seems that the national data strategy is focused on enabling data sharing for the processes of economic growth, rather than protecting our national interests, and the privacy and security of persons and organisations. That comes back to a theme that we have repeatedly mentioned, which is the potential conflict of interest within the Department between its economic missions and motives for investment and growth, and our national security, which we have agreed should be the foremost responsibility of Government.
We have concerns regarding the current data-sharing environment and the intention of the Government in promoting data sharing specifically. Therefore, the wide range that the clause gives the Secretary of State in sharing data with overseas public authorities on appearances only does not facilitate the good working of the Bill. Businesses and investors will be expected to share their most critical information relevant to security, criminality and commercial confidentiality, yet the Secretary of State will have the power to share that information with overseas public authorities on what can best be described as a flimsy test.
The Secretary of State will be able to share that information with persons who appear to be exercising a public function. Can the Minister give some indication of how one appears to be exercising a public function? We seek to add “on a reasonable enquiry”, which would ensure that there was at least some evidence for that decision.
I am conscious, Mr Twigg, that similar language appears in section 243 of the Enterprise Act 2002.

Nadhim Zahawi: indicated assent.

Chi Onwurah: I hope the Minister also agrees that we are moving to a much expanded national security screening regime. In 2002, Facebook was a year old or just being born. We are no longer in the place we were in 2002 when it comes to the issues of importance, volume, security and privacy associated with data and data sharing. I hope he will not rely on the 2002 Act as a justification, particularly as we are moving to an expanded national security screening issue and we are in a different data environment.
The strategy says that data is the economic engine, and we must be much better in assuring businesses and investors of their data protection. Instead of relying on appearances, the amendment holds up the standard of reason. Under it, the Secretary of State would have all the relevant powers of data sharing with relevant persons  so long as the Secretary of State had reason, based “on a reasonable enquiry”, to think the person to be a relevant public authority.
It is critical that the UK has a national security regime that is grounded in national, competent exercise of state power to protect our security. The amendment would help to build success in that direction by removing a reliance on the use of appearance and instinct, by successive Secretaries of State, and grounding decisions in “reasonable enquiry” instead.
The expert evidence sessions provided support for that view. For example, Chris Cummings from the Investment Association said:
“There is so much around any investment process and the acquisition process that has to remain entirely confidential, that investors would require and would be looking for reassurance that these conversations could be held in the strictest of confidence and that nothing would appear until the right time.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 66, Q78.]
I ask the Committee to consider whether sharing data on the basis of appearances gives that reassurance.
The clause will give information-sharing powers to the Secretary of State. We recognise the importance of that, and we do not want to hinder it unduly, but we expect that the Secretary of State should, and importantly, should be seen to, exercise those powers on the basis of evidence. It is only right that we have clear evidential requirements. Although the 2002 Act uses similar language, it is right that we in this Committee clean up that language based on 19 further years of experience.

Alan Whitehead: I wonder whether my hon. Friend might be tempted to use a bank manager comparison here as well. If I was summoned by my bank manager to the bank, and he or she said, “It appears you’re overdrawn,” and I said, “Why do you think I’m overdrawn?” and he or she said, “I don’t know. It just appears to me that you’re overdrawn,” I might say, “Could you pursue reasonable inquiries to find out whether my account is actually overdrawn or not?” Does she agree that that is an example of the appropriate use of ordinary language, and that the Bill could be put into that state?

Chi Onwurah: I commend my hon. Friend on the extent to which he has used engagement with a bank manager to illuminate much of our discussion. He is absolutely right. To be honest, if any bank invited you to consider an overdraft on such a flimsy pretext, you would, I hope, change your bank, because you could not feel confident in it.
The serious point is that small and medium businesses and start-ups—our great innovation ecosystem in this country—can move, but we do not want them to move. We want them to stay in this country within the legislative framework. We want the new Bill to provide them with the reassurance and confidence that they need to help to implement the Bill effectively and to protect national security. My hon. Friend’s elegant example highlights the failings of the clause.
I anticipate that the Minister will talk about the language in the Enterprise Act. Not only is that 18 or 19 years old, which is one reason that this Bill has been needed for so long, but the person exercising the functions and powers in the Competition and Markets Authority is not a political appointee or political figure. The Bill refers to a political figure, the Secretary of State, so it is  all the more important that he or she should be seen to act on the basis of evidence, not on the basis of appearance or instinct.

Derek Twigg: I gently remind hon. Members to address the Chair when speaking. Thank you very much.

Nadhim Zahawi: With your permission, Mr Twigg, I will speak initially to clause 54 stand part and then address amendment 30, relating to clause 54. I will then turn to clause 55 stand part.
On clause 54, for this regime to function effectively, the Secretary of State needs access to the right information at the right time to make decisions with the fullest range of evidence available. All relevant information required by the Secretary of State to make a decision might not be obtainable from the parties to the acquisition, but rather might be stored by other public authorities, both in the UK and overseas. The hon. Member for Newcastle upon Tyne Central referred to the speed at which deals have changed; she mentioned Facebook and others. I agree that modern deals are structured in an increasingly complex manner and often across borders and continents. There is a need to work with allies at home and abroad to ensure that we are making well-aligned, timely and correct decisions.
Therefore, the clause provides that public authorities may disclose information to the Secretary of State for the purpose of facilitating the exercise of his functions under the Bill. Equally, it permits the Secretary of State to disclose information to UK and overseas public authorities for the purpose of facilitating his functions under the Bill, but also for a limited number of other purposes, including crime prevention and the protection of national security. I absolutely agree with those who say that businesses do not want slow decisions made by multiple public authorities working in silos. We all want to see an efficient regime in place. Businesses want public authorities that can talk to each other and give a quick and efficient answer that is right first time. Being able to share information is the first step in Government making fast and informed decisions without having to burden businesses unduly, which I know the hon. Lady cares about.
I of course recognise, though, that some hon. Members will feel uneasy about the Government being able to share potentially very sensitive information both within the UK and overseas. The clause includes a number of safeguards relating to the disclosure of information by the Secretary of State. First, the clause prohibits onward disclosure of information shared by the Secretary of State or use for an alternative purpose without his consent. Secondly, when disclosing information, the Secretary of State must consider whether the disclosure would prejudice, to an unreasonable degree, the commercial interests of any person concerned.

Peter Grant: I fully support the principle that we should share this kind of information with friendly overseas authorities—subject to appropriate precautions to prevent it from being used for the wrong purposes. However, somebody in the UK who breaks this law will get prosecuted, but an overseas public authority cannot be prosecuted in the UK courts, so can the Minister explain why, under clause 54(7), which lists the factors that the Secretary of State has to  consider before deciding whether to release information to an overseas public authority, there is no requirement to assess the rule of law in that other place and to consider whether it has equivalent legislation to prohibit the misuse of information? There is no requirement for the Secretary of State to consider whether they have been given guarantees or assurances by a Government whose word we would expect to be able to take. There is not even a requirement to consider whether the request for information itself might be an attempt to undermine national security.
If the Secretary of State is looking at a potential Chinese takeover of a sensitive undertaking in the UK and a public authority in China says, “We need this information for an inquiry that we are doing,” there is no requirement for the Secretary of State to take that into account. Can the Minister explain why none of those things is built into this clause now, and are the Government willing to consider amending the clause at a later stage to give the further protection that we may need?

Nadhim Zahawi: I am grateful to the hon. Member. I hope that in my further remarks, if I can make some headway, I will be able to reassure him on those points.
Thirdly, when disclosing information to an overseas public authority, the Secretary of State must have particular regard to whether the law of the country or territory to whose authority the information is being disclosed provides protection against self-incrimination in criminal proceedings corresponding to the protection provided in the UK, and whether the matter is sufficiently serious to justify disclosure. I hope that addresses the hon. Member’s point.

Peter Grant: rose—

Derek Twigg: Order. Mr Grant, please keep your intervention short. If you want to speak, you are allowed to later.

Peter Grant: I am sorry to intervene again so quickly, but the precautions in subsection (7) do not address any of the matters that I raised. Subsection (7)(a) in particular is vital and necessary, but it is nowhere near sufficient and does not address any of the points that I raised.

Nadhim Zahawi: I am grateful. If the drive of the hon. Member’s probing is to ensure that the Secretary of State, when he considers disclosing information to a foreign country, takes into account protecting people being caught in the regime who come from that country, I think I have just made it clear that the clause provides protection against self-incrimination in criminal proceedings corresponding to the protection provided in the United Kingdom. I hope that the hon. Member will be satisfied with that.
Finally, the disclosure is subject to data protection legislation, which provides additional safeguards in relation to the disclosure of personal data. I hope that the hon. Member for Newcastle upon Tyne Central will feel reassured that the Secretary of State may request only the information that he requires in order to exercise his function under the Bill, and that such information will be treated securely.
Amendment 30 aims to increase the scrutiny that the Secretary of State undertakes in deciding whether a person constitutes an overseas public authority for the purposes of disclosing information under clause 54. It is of course important to ensure that any person believed to be a public authority for the purposes of seeking information from, or disclosing information to, is a public authority. I am therefore pleased to reassure the hon. Lady that the Bill does that as it stands. The approach that we have taken mirrors that—I know that she does not like this—in section 243(11) of the Enterprise Act 2002, which includes a similar definition of an overseas public authority for the purposes of disclosure of specified information to overseas public authorities under the Act.

Chi Onwurah: The Minister is generous in giving way. On his rebuttal of my argument on the CMA, it is not about whether I like it. The whole point of the amendment is to take it away from likes, preferences or appearances, and base it on evidence, and the evidence is that the environment has changed dramatically since 2002 in terms of data. Also, the Secretary of State is a political figure.

Nadhim Zahawi: I am grateful to the hon. Lady. I remind her that the legislation requires the Secretary of State to act in a quasi-judicial way, not as a political figure. I appreciate that by a normal reading, “appears” may appear unduly casual, but that is merely a question of the form of legislative drafting, which is consistent, I remind her, with previous relevant legislation.
In addition, I reassure the hon. Lady that the principles of public law apply in any case. The Secretary of State therefore needs to act reasonably in fulfilling his functions under the Bill. That includes having a reasonable basis, supported by sufficient evidence, for coming to the conclusion that a person appears to be an overseas public authority prior to disclosing information. I hope I have provided the Committee with sufficient reassurances, and I therefore hope that the Opposition will withdraw the amendment.

Matt Western: I just want clarification from the Minister on the point of that being semi-judicial.

Nadhim Zahawi: Quasi-judicial.

Matt Western: Quasi-judicial; sorry. How does that square with the responsibilities of the Minister in the Department for Business, Energy and Industrial Strategy?

Nadhim Zahawi: It is not a strange concept that a Minister acts in a quasi-judicial way in making such decisions.
I will now briefly turn to clause 55, which makes provision for specific restrictions in respect of information received under clause 54 from Her Majesty’s Revenue and Customs. For the regime to function effectively, the Secretary of State needs access to the right information at the right time in order to make decisions with the fullest range of evidence available. One such source of information that might be invaluable to the Secretary of State is HMRC. Although the Government expect that the Secretary of State would seek first to secure the information he needs from the parties, it is important that such information can also be provided from elsewhere in Government, if it is held there.
Clause 55 provides that where information is received by the Secretary of State from HMRC or an onward recipient pursuant to clause 54, it may not be used for purposes other than the Secretary of State’s function under the Bill, and nor may it be further disclosed without HMRC’s consent. Clause 35 provides that disclosing information in contravention of clause 55(1) is an offence, as is appropriate.

Chi Onwurah: Will the Minister give way?

Nadhim Zahawi: I am just finishing my point.
I hope that hon. Members will agree that clause 55 provides appropriately robust safeguards for the onward sharing or use of information received from HMRC for the purposes of the regime. I recommend that clauses 54 and 55 stand part of the Bill.

Chi Onwurah: I would like to address a question to the Minister. In his remarks on these clauses, he has highlighted a concern. I might have missed it, but I do not see where the Bill sets out the information gateway through which the Secretary of State will receive information from HMRC in order to exercise his functions under the Bill. Clauses 54 and 55 are grouped together under the title of “Information gateways”. They discuss information gateways from the Secretary of State to public authorities and others, but I would really appreciate it if the Minister could write to me to set out how HMRC will disclose information to BEIS for the functions of the Bill. I am sure I do not need to remind the Committee that information held by HMRC is generally considered very sensitive by businesses and individuals alike, and there are generally clear restrictions on its sharing.
To return to the clauses and amendment more generally, part of the Minister’s argument missed what our argument was. We recognise the importance of disclosing some information, and we also recognise that clause 55 sets out tests with regard to the purposes of disclosing the information, and even to how the information can be shared onwards and to what information should be disclosed. What it does not do is test the nature of the public authority. Although we have had an interesting and, indeed, lively debate about the difference between legal language and casual language, I think we can all agree that it is in the interests of our democracy that our legislation can be read and understood by ordinary people. If the term “appears” is to be understood as it is commonly understood, the clause requires the support of our amendment.

Question put, That the amendment be made.

The Committee divided: Ayes 5, Noes 9.

Question accordingly negatived.

Clause 54 ordered to stand part of the Bill.

Clause 55 ordered to stand part of the Bill.

Clause 56 - Duty of CMA to provide information and assistance

Question proposed, That the clause stand part of the Bill.

Nadhim Zahawi: Clause 56 places a duty on the CMA to provide information and any other assistance to the Secretary of State to enable him to carry out his functions under the Bill. For this regime to function effectively, the Secretary of State needs access to the right information at the right time to make decisions with the fullest range of available evidence.
The Competition and Markets Authority, by virtue of its position as the market regulator, will naturally have access to information that could be relevant to the decisions made by the Secretary of State. Although in practice we would expect the CMA to be entirely willing to provide support to the regime, and we have worked closely with it in drafting the legislation, the clause ensures that there is no doubt in law about the duty placed on the CMA to provide any information in its possession or any other assistance in its power when directed to do so by the Secretary of State, so long as the information or assistance is reasonably required to facilitate the Secretary of State’s functions under the Bill.
I therefore anticipate that the power in the clause—mirroring section 105(5) of the Enterprise Act 2002—would, in practice, be used only rarely, given the Department’s good working relationship with the CMA. I hope the Committee will appreciate that the clause is quite simply about ensuring that the Secretary of State has access to pertinent information relevant to the decision-making process.

Alan Whitehead: I note that the Minister has used precisely the opposite argument that he used for the last clause, relating to the word “must”. In clause 56, the CMA “must” give the Secretary of State information. [Interruption.]

Derek Twigg: Order. Can we have just one meeting, please?

Alan Whitehead: Even though the Minister has worked well with the CMA, as he has just said, and is assured that the relationship will work well, he has put it into legislation just to make sure that it does.

Matt Western: My hon. Friend the Member for Southampton, Test has stolen my thunder—had I known that he was going to stand up, I perhaps would not have done so. It is interesting that paragraph (a) says “must” but paragraph (b) says “may”. Another valid point, beyond the semantics, is about the substance and the resource of the CMA, and whether there should be  provision for that in the Bill. Can the Minister comment on the capacity of the CMA to support the demands and obligations set out in the clause?

Chi Onwurah: I will say a few words to the clause—reflecting the comments made by my hon. Friend the Member for Southampton, Test, in particular—because there seems to be a theme in the Bill. I know that the Minister believes that the Bill is beyond improvement, and that he is reluctant even to contemplate any changes, as he said in response to the hon. Member for Glenrothes, but he must recognise that a consistent theme seems to be that requirements, or “musts”, are placed on others and the discretion—the “may”, if you like—is with the Business Secretary. The Minister himself observed that we are keen to allow the Business Secretary the necessary discretion to fully protect our national security, but does he see not that that would better achieved by clearly circumscribing the Business Secretary’s actions?
I also support my hon. Friend the Member for Warwick and Leamington in his recent contribution. Throughout this Bill, we need to ensure that the resources are there when placing requirements on bodies. I hope that the Minister can give such reassurances. On that basis, we recognise that the clause should stand part.

Question put and agreed to.

Clause 56 accordingly ordered to stand part of the Bill.

Clause 57 - Data Protection

Question proposed, That the clause stand part of the Bill.

Nadhim Zahawi: Clause 57 provides that the provisions in parts 1 to 4 of the Bill containing a duty or power to disclose or use information do not authorise a contravention of data protection legislation, as set out in the Data Protection Act 2018. In addition, the clause provides that that information may be used or disclosed only if it does not contravene parts 1 to 7, or chapter 1 of part 9, of the Investigatory Powers Act 2016, which contains provisions about conducting interception, including restrictions on use and disclosure of intercepted information. These standard provisions are included where legislation concerns the use or disclosure of information. I hope that hon. Members will therefore be content to support this standard clause as part of the legislation.

Question put and agreed to.

Clause 57 accordingly ordered to stand part of the Bill.

Clause 58 - Minor and Consequential Amendments and Revocations

Question proposed, That the clause stand part of the Bill.

Derek Twigg: With this it will be convenient to consider that schedule 2 be the Second schedule to the Bill.

Nadhim Zahawi: Clause 58 is purely technical in nature and inserts schedule 2 into the Bill. Schedule 2 provides for minor and consequential amendments and revocations. The Secretary of State currently has the  power to intervene in qualifying mergers on national security grounds by issuing a public interest intervention notice, a special intervention notice or a European intervention notice under the Enterprise Act 2002, where the statutory requirements are met. It would clearly be unnecessary for the Secretary of State to retain these powers once the provisions of the Bill come into force. Schedule 2 therefore removes national security as a ground on which the Secretary of State may intervene under the Enterprise Act 2002. The Secretary of State will retain the powers in the Enterprise Act 2002 to intervene in qualifying mergers where these raise issues of media plurality, the stability of the UK financial system or maintaining in the UK the capability to combat and to mitigate the effects of public health emergencies.

Question put and agreed to.

Clause 58 accordingly ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 59 - Overseas information disclosure

Question proposed, That the clause stand part of the Bill.

Nadhim Zahawi: Clause 59 removes a restriction on the ability of the Competition and Markets Authority to co-operate with its international partners on merger cases. At the end of the transition period, the UK will no longer be part of the European Union’s competition system. The CMA will become responsible for investigating the effects on competition of larger international mergers, which were previously investigated by the European Commission. In a globalised economy, effective cross-border enforcement of competition law, which protects UK markets and consumers, relies increasingly on close international co-operation. The ability to disclose confidential information to assist an overseas authority with this enforcement activity, including in circumstances where parties have not provided their consent for the information to be disclosed, is a crucial ingredient of strong co-operation.
Moreover, the willingness of an overseas authority to disclose confidential information will often depend on whether the receiving authority can reciprocate. Any restrictions on the CMA’s ability to disclose such information could therefore inhibit the effectiveness of its international co-operation. The overseas disclosure gateway, which is set out in section 243 of the Enterprise Act 2002, provides an important mechanism for the CMA to disclose information to its overseas counterparts when consent has not been provided by relevant parties. The gateway permits disclosure for the purpose of helping an overseas authority’s enforcement activities.
However, the CMA is currently unable to use the overseas disclosure gateway to disclose information that comes to it in connection with a merger investigation. This means that the CMA is restricted from sharing certain information with its overseas counterparts that might be crucial to their investigation of a merger. This restriction presents two challenges for the UK’s competition authorities. First, it weakens the control of mergers with an international dimension that might adversely affect UK markets and consumers. Secondly, it inhibits the CMA’s ability to receive information that might be critical to its own merger investigations, because it has  no ability to reciprocate. That, in turn, could also weaken its protection of UK markets and consumers. Clause 59 rectifies this by removing the restriction in the overseas disclosure gateway and allowing the CMA to use the gateway to disclose merger information to overseas public authorities.

Chi Onwurah: I thank the Minister for setting out clause 59, because I had thought that it was inconsequential. I listened to what he said carefully, as I always do, but I did not hear him use the term “national security” once. The function of the Bill is national security. Although we have not defined it, we have debated that the Bill should be narrowly circumscribed to concerns of national security. Having listened carefully to the Minister, I get the impression that the clause has been added, and for very good reasons, to facilitate and enable the CMA’s competition and mergers powers.
We are putting the national security interest relating to mergers and acquisitions firmly here in the Bill, so the CMA is no longer concerned with and involved in that, yet this clause facilitates the CMA’s sharing of information with overseas public authorities. That information, by definition, will not be with regard to national security, because national security investigations will take place under the powers in the Bill that lie with the Secretary of State. I am somewhat confused as to what this clause is doing in the Bill. Would the Minister like to intervene to illuminate and clarify that the clause has something to do with national security?

Nadhim Zahawi: The hon. Lady is quite right that it is to help the CMA.

Chi Onwurah: I find it somewhat worrying, given our debates about keeping the Bill focused narrowly on national security, that the Government have added a clause to help the CMA in its functions. My hon. Friends and I have been thinking of a number of ways in which we would like to help the CMA in its functions and to improve the Enterprise Act, but we have been resolute in focusing on national security, because that is the matter before the Committee. Yet it seems that the clause, although very well meaning, is designed for an entirely different function.
You are not stopping the debate, Mr Twigg, so I presume it is in order to debate the functions of the CMA in relation to competitions and mergers generally, rather than to national security specifically.

Nadhim Zahawi: It is worth respectfully reminding the hon. Lady and the Committee that this is a separate topic in the Bill that is unrelated to the NSI regime, as set out in the explanatory notes.

Chi Onwurah: I have the explanatory notes, and they do not state that the clause deals with a separate topic. Paragraph 173 states:
“Clause 59 amends the overseas disclosure gateway in section 243 of the Enterprise Act 2002, removing the restriction on UK public authorities disclosing information that comes to them in connection with a merger investigation under that gateway.”
The explanatory notes do not state that the functions of the CMA are separate from national security as clearly as the Minister just has. I do not want to detain the Committee, but I register the Labour party’s concern—

Peter Grant: Does the hon. Lady share my understanding that the definitive statement on what the Bill is about is the long title of the Bill, not the explanatory notes? Does she agree that the long title makes no mention whatsoever of helping the CMA in the general exercise of its purpose?

Chi Onwurah: I am grateful to the hon. Gentleman for his intervention, because he is absolutely right that, rather than having a debate on the contents of the explanatory notes, line-by-line scrutiny of the Bill should focus on what the Bill says, and it does not mention general improvements to our competition and mergers regime, much as we feel that improvements could be made. Although we will not oppose the clause, I register our disappointment that we were not better informed of the Bill’s additional scope.

Nadhim Zahawi: I think that is slightly unfair; it is included in page 4 of the explanatory notes.

Chi Onwurah: The Minister’s argument is to look at page 4 of the explanatory notes, but it does not say that the CMA’s functions are separate from national security.

Michael Tomlinson: “Interaction with” the CMA.

Chi Onwurah: It says “interaction with” the CMA. but it does not say that that is separate from national security. In this afternoon’s sitting, when we discuss the additions that we would like to the remit and definition of “national security”, I hope that the Minister will recognise that the Bill is broader than national security, as was simply understood from his previous responses.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Clause 60 - Defamation

Question proposed, That the clause stand part of the Bill.

Nadhim Zahawi: Clause 60 provides the Secretary of State and the CMA with absolute privilege against action for defamation as a result of the exercise of functions under or by virtue of the Bill. The clause has been included to ensure that the Secretary of State and the CMA have absolute privilege from defamation claims, on the basis that the function of the regime to protect national security is too important to be at risk or in any way curtailed by claims of defamation. It is, of course, not the Government’s intention to defame anyone through the regime or more widely. I hope that hon. Members will agree that this is an appropriate protection, supported by a well-reasoned regime that seeks to protect national security while supporting businesses and investors.

Alan Whitehead: I understand the purpose of the clause and, as the Minister indicated, the question of national security is very important. I can imagine circumstances in which the Secretary of State may, for example, suggest that a company is an agent of a foreign power. That  might be seen to be defamatory, but in terms of the inquiry that is being undertaken the Minister should be protected against such an action.
However, the clause states that there is absolute privilege, which appears to suggest that the privilege could be exercised even on a wholly unreasonable basis—that is, the Minister could say or write what he or she likes about anybody provided it is under the cover of, or could be attached to the purposes of, the Bill. That seems a bit of a wide-ranging provision.
I appreciate what the Minister said on the provision, and that he has already said that it would not be his intention to defame anybody, but might he provide us with an assurance today, on the record, that notwithstanding the very wide scope of the Bill, he does not see the clause as an opportunity for the Secretary of State to wantonly defame anybody if they felt like it, and that it would be strictly used in terms of inquiries that were being undertaken for the purpose of the Bill, and not for any other purposes?

Nadhim Zahawi: I hope I have already made it clear that the Government would not intend to defame anybody. The reason for the clause is that there are various points in the regime where the Secretary of State will make statements that are, in effect, published and would include communications with other parties as well as those for general public consumption. He may therefore be open to such claims, which is why the clause is in the Bill.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61 - Annual report

Sam Tarry: I beg to move amendment 31, in clause61,page36,line20,at end insert—
“(m) the average
number of days taken to assess a trigger event called in under the
Act;
(n) the
average number of days taken for acceptance decisions in respect of
mandatory and voluntary
notices;
(o)
the average annual headcount allocated to the
operation of reviews of notices made under sections 14 and 18 over the
relevant period;
(p)
the proportion and number of Small to Medium
Enterprises in the overall number of notices and call-in
notices.”
This amendment would require the Secretary of State to report on the time taken to process notices, the resource allocated to the new Unit and the extent to which Small to Medium Enterprises are being called-in under the new regime.

Derek Twigg: With this it will be convenient to discuss clause stand part.

Sam Tarry: Before turning to the amendment, it occurs to me that the Minister, in his new role as vaccinations tsar, could consider this Committee Room as somewhere to store some of the vaccine.
Amendment 31 would simply require the Secretary of State to report on the time taken to process notices, on the resource allocated to the new unit, and on the extent to which small and medium-sized enterprises are called  in under the new regime. It is about requiring greater accountability from BEIS in the investment security unit’s service standards. That sounds anodyne, but it does something very important.
Throughout our discussions, there has been one point of agreement across the Committee: hon. Members, across party lines, have raised concerns about the capacity and capability that a new investment security unit will have to deliver on the Bill’s ambition. A number of the expert witnesses added to that concern, describing the shift as “seismic”—totally transformational—and said that changes will need to be thoroughly resourced in that unit, which should be especially prepared to work closely and efficiently with our innovative start-ups.
Indeed, some of the experts were pretty clear on that point. David Petrie of the ICAEW said:
“The first point I make about that is that this new investment security unit will need to be very well resourced. A thousand notifications a year is four a day; I am just testing it for reasonableness, as accountants are inclined to do. That is quite a lot of inquiries.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 53, Q60.]

Peter Grant: I certainly sympathise with the hon. Gentleman’s desire for that information to be published. Can he explain why the Bill should require that it be published, rather than leaving it to ongoing scrutiny by the relevant Select Committee? Does he think that the wording of paragraph (o) of the amendment needs to be more precise to be part of an Act of Parliament? If scrutiny were left to the discretion of a Select Committee, it would not need to be quite so clear about what “average” means, for example, because five or six different words mean “average” to statisticians.

Sam Tarry: The hon. Gentleman raises a good point. I think that the wording is precise enough. The accompanying guidance to the Bill could perhaps clarify some of those points. The key reason that we want that in the Bill, rather than for it to be overseen in the way that he has suggested, is that—

Derek Twigg: Would the hon. Gentleman face the Chair when he is speaking, please? Thank you.

Sam Tarry: Certainly, Chair. It is incredibly important to give that sense of clarity and time to small and medium enterprises. That has been a running theme for a number of our amendments, and there are three reasons, which it might help the hon. Member for Glenrothes to understand: first, the unit’s efficiency; secondly, its capacity; and thirdly, its focus on SMEs.
I will expand on that. First, on the unit’s efficiency, by reporting the aggregate time taken for decisions—both assessment decisions and initial acceptance or rejection notices—we would have a mechanism to ensure that the new regime works more efficiently for SMEs. Secondly, on capacity, the amendment drives towards taking stock of the resources behind the unit’s work, so that Parliament and the public will have a mechanism for holding the Government to account for what will be a major new centre for merger investment screening in the UK. Thirdly, we in the Labour party have really tried to make that focus on SMEs paramount in the Bill, so that we have a climate in which SMEs can thrive. That would simply mean that the unit could track the focus of SMEs in its work, and would be able to highlight specific concerns  and the experiences of our most innovative start-ups when interacting with the new regime. Seeing that in live time would be useful for the forward planning of SMEs, and for the Government and Parliament to be able oversee how the process is working once it is in place.
Each paragraph of the clause maintains the Government’s power to act to protect national security. The clause simply holds power to account through what we would call aggregated transparency.

Nadhim Zahawi: I am grateful to the hon. Member for Ilford South. We are not quite at minus 70 °C, but we are probably very close to it.
I will speak initially to clause 61 stand part before turning to amendment 31. It is crucial for investor confidence that there is as much transparency as possible in the regime, but of course there is evidently a limit to how much the Government can disclose, given that the regime deals explicitly with national security matters. That said, alongside appropriate protections for personal data and commercially sensitive information around national security assessments, the Government are committed to providing as much transparency as possible when it comes to how the new regime functions at an aggregate level.
Hon. Members will appreciate that, due to the sensitive information generated by the regime with respect to personal and commercial data and national security risk, there is a limit to how much the Secretary of State can disclose publicly. The clause requires the Secretary of State to report annually to Parliament on the use of the powers under the regime. The details of what the report must contain are set out in subsection (2), but I would like to highlight a few points to assist the Committee’s scrutiny.
The report must include information on the sectors of the economy in which voluntary, mandatory and calling notices were given. This will provide Parliament and the public with the ability to scrutinise how effectively the definitions of the mandatory sectors are functioning. It will also give a sense of the areas in the economy where the greatest activity of national security concern is occurring.
The report must also provide the expenditure incurred by the Secretary of State in connection with providing financial assistance to entities in consequence of the making of a final order under the power in clause 30. Those details will, along with those others set out in the clause, provide Parliament with good insight into how the regime is functioning in practice.
It is our view that this annual report will also serve a further important function—to assure investors of Her Majesty’s Government’s technical and dispassionate approach to the screening of investments, providing investors with a predictable and transparent regime, which will continue the UK’s reputation as a great place to do business and to invest.
Amendment 31 seeks to add much to the long list of information that clause 61 requires the Secretary of State to include in the annual report. I will endeavour to be brief in my response. The first part of the amendment seeks inclusion of the average number of days taken to assess a trigger event that has been called in. Hon.  Members will remember that clause 23 provides statutory time periods for assessment under the regime. Given those time limits, which are as short as we are able to make them, while also ensuring there is time for appropriate national security assessment, I see no grounds for nor benefit from including average times in the annual report.
Secondly, in relation to the time taken for deciding whether to accept mandatory notices and voluntary notices, the Secretary of State must already, as soon as reasonably practicable after receiving a notice, decide whether to accept or reject. Additionally, if rejected, the Secretary of State, as soon as practicable, must provide reasons in writing for that decision to the relevant parties.
Thirdly, the amendment seeks the inclusion of the average headcount of the investment security unit in the annual report. I refer the hon. Member for Ilford South to my response to amendment 9. Arrangements on resourcing are an internal matter for the BEIS permanent secretary. As the Committee will know, it takes only a small group of exceptionally gifted people to improve our nation’s security, as we are doing here in the scrutiny of this Bill. Look around you, Mr Twigg: everybody here is incredibly talented and therefore doing an incredible job in refining the Bill. There will, of course, be sufficient resourcing allocated to the unit in any case.

Chi Onwurah: I wholeheartedly endorse the Minister’s words on the skill and talents in this Committee Room. He said we were improving the Bill, but he is yet to accept any changes, so I am intrigued to understand what improvements he feels we have made.

Nadhim Zahawi: It is the challenge the hon. Lady offers that allows a Minister as junior as the one standing before hon. Members to be able to make the argument.
Finally, the report will also give a sense of the sectors of the economy where the greatest activity of national security concern is occurring. The Secretary of State may include additional information in relation to SMEs if he considers that to be appropriate. For those reasons, I am unable to accept the amendment, and I hope that the hon. Member for Ilford South can withdraw it.

Chi Onwurah: I will say a few words in support of the amendment and on the clause, and will respond to the Minister’s comments. I think we all recognise the importance of reporting annually on the seismic shift in our national security, and of scrutiny of mergers and acquisitions. Yet it has to be said that the Bill does not say what the report’s objective is. Neither did the Minister, in listing what was included, give an understanding of the reasons the items have been included, even as he rejected the amendment of my hon. Friend the Member for Ilford South, which seeks to add points of particular interest to small and medium-sized enterprises.
I note, for example, that the number of final notifications is given but not the number of interim notifications or interim orders made. It is hard to see whether the objective of the report is to give greater confidence, to enable us to fully understand the working, or to enable us to see whether the limited contents of the impact assessment prove to be accurate. The kind of information in the report, and in my hon. Friend’s amendment, is the information that a well-run Department should wish to have. Although we are unclear on the objective of the report, which is not set out, reporting on those  items as fully as possible would certainly improve the workings of the Bill, as my hon. Friend has said he seeks to do.

Sam Tarry: I listened to the Minister’s assessment. We want to tackle a number of other substantial issues this afternoon, so on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 61 ordered to stand part of the Bill.

Clause 62 - Transitional and saving provision in relation to the Enterprise Act 2002

Question proposed, That the clause stand part of the Bill.

Derek Twigg: With this it will be convenient to discuss clauses 63 to 66 stand part.

Nadhim Zahawi: I now turn to the Bill’s final provisions. Clause 62 sets out the transitional provisions for cases that may qualify for intervention under both the Bill and the Enterprise Act 2002. The starting point for the transition arrangement is that the 2002 Act continues to apply in relation to national security until the new regime is commenced. That means that qualifying mergers can continue to be scrutinised under the Act where the statutory requirements are met.
However, the Government do not wish to expose to some form of double jeopardy qualifying mergers that take place after the introduction of the Bill but before commencement. The clause means that, in effect, the Secretary of State must use one Act or the other. Not doing so would create significant uncertainty for business and investors and could, at least theoretically, lead to the perverse position of the Secretary of State, following commencement of the Bill, re-examining decisions that they themselves made merely weeks ago under the 2002 Act.
Clause 63 makes provision in relation to the regulations that may be made under the Bill, setting out how they must be made and what they may contain. All the  regulations that may be made under the Bill are subject to the negative resolution procedure, except regulations made under clause 6, “Notifiable acquisitions”, clause 11, “Exceptions relating to control of assets”. and clause 41, “Permitted maximum penalties”, where the draft affirmative procedure will apply. Given their nature and effect, the Government consider that regulations under those three powers should be subject to the approval of Parliament.
Clause 64 provides that any expenditure incurred by the Secretary of State under the Bill is to be paid out of money provided by Parliament. Clause 65 is purely a technical one to provide for definitions of the key terms used in the Bill. I do not intend to explore individual meanings of key terms now; I will instead direct hon. Members to lunch and to the relevant clauses that provide them. Finally, hon. Members will appreciate that clause 66 is purely a technical one to set out the Bill’s short title and provide details about the commencement of the Bill’s clauses and the extent of the Bill.

Chi Onwurah: I thank the Minister for setting out the provisions of the clauses and for moving us onwards to lunch and to the end of the Bill. I will not detain the Committee with a detailed consideration of the technical provisions in the clauses and the interpretation of the various terms. However, the Bill as a whole would benefit from greater clarity, as my hon. Friend the Member for Southampton, Test has so well set out, particularly in his reference to the use of language by bank managers.
We will not oppose the final clauses. We congratulate the Committee and particularly the Clerks and all those who have supported us in enabling us to reach the final clauses.

Question put and agreed to.

Clause 62 accordingly ordered to stand part of the Bill.

Clauses 63 to 66 ordered to stand part of the Bill.

Michael Tomlinson: On this occasion I will, without rudely interrupting anyone, beg to move that the Committee do now adjourn.

Ordered, That further consideration be now adjourned.—(Michael Tomlinson.)

Adjourned till this day at Two o’clock.